30/05/2024

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The Best Business Loans for a 500 Credit Score

The Best Business Loans for a 500 Credit Score

Key takeaways

  • Many lenders state their credit score requirements, helping you narrow down small business loans for bad credit
  • Some loans focus less on your business credit history and more on future sales or revenue from invoices
  • Offering assets or collateral can make you less risky and improve your chances of approval with the lender

Good news: having a credit score of 500 doesn’t make getting a business loan impossible. But since that score is considered poor, you will need to look for bad credit business loans. You should also be prepared for higher borrowing costs including higher interest rates than lenders would extend to strong credit borrowers.

To find the best business loan for a 500 credit score, compare multiple lenders and financing offers, including these seven small business loans.

Lender Best for Min. credit score Bankrate score
SBA microloans Affordable business loans No credit requirement N/A
Fundible Low revenue requirement 450 4.7
Fora Financial Fast business loans 500 4.6
Bank of America Credit-building line of credit N/A 4.3
Kiva Crowdfunding N/A 4.3
PayPal No-credit-check business loan None for working capital loans 4.2
Uncapped Revenue-based funding N/A 4.1

SBA microloans are government small business loans designed to support businesses commonly pressed out of traditional lending. These loans are known for their small loan sizes up to $50,000 with interest rates usually falling between 8 percent and 13 percent. These features are offered in hopes of providing manageable loan payments to disadvantaged businesses. This type of SBA loan also nixes the guarantee fee that most other SBA loans require.

You can find SBA microloans through approved microlenders, usually nonprofits dedicated to seeing small businesses grow and using loans and education to do so. But like most SBA loans, the cost of affordability is that it can take 30 to 90 days to complete the funding process.

  • SBA microloans tend to relax eligibility requirements. Some microlenders like Accompany Capital even take credit requirements out of the equation. Common requirements for an SBA microloan:

    • Personal credit scores around 500
    • Detailed business plan
    • Collateral or personal guarantee often required

Fundible offers the best blend of online business lending and leniency toward credit and revenue. It’s capable of handling a variety of small business needs, accepting revenue levels as low as $96,000 per year. Loans offered with this revenue minimum include equipment financing, bridge loans and invoice financing.

Along with relaxed revenue, a Fundible representative stated that the fintech lender works with business owners whose credit scores have dipped to 450. Officially, all three of these business loans need at least a personal credit score of 500, as per the website.

Fundible also offers a business line of credit for business owners with personal credit scores of  580 and above. But this loan has a taller order for revenue, wanting at least $200,000 per year.

  • The requirements vary significantly depending on which small business loan you opt for through Fundible. But its minimum standards to apply are:

    • At least a 450 personal credit score
    • 6 months in business
    • $96,000 in annual revenue

Fora Financial stands apart as an online lender granting high-dollar business loans within 72 hours or less. Small business owners can choose between a short-term working capital loan or revenue advance, which is the equivalent of a merchant cash advance. Both loans offer wide-spanning loans ranging from $5,000 to $1.5 million and repayment terms of up to 16 months.

You can find online lenders able to finalize approvals more quickly within 24 hours, while traditional banks might take weeks to approve business loans. Fora Financial rests in between these funding timelines, blending the best of both worlds. It gives the chance at small or large business loans with the relaxed lending requirements typical of online lenders.

  • Fora Financial gives many business owners the opportunity to get the funding they need, even with less-than-stellar credit. Its minimum requirements include:

    • $10,000 in average monthly revenue for the past 3 months
    • 500 personal credit score
    • 3 months in business

Bank of America’s lineup includes a variety of business loans built for different needs, from revolving loans to one-time term loans for designated purposes. Its cash-secured business line of credit is one of its most unique loans.

The credit line offers limits starting at $1,000 and lets you open it with a $1,000 deposit, acting as the available credit to draw from. This allows you to build business credit. Over time, Bank of America may even graduate your business to its standard unsecured business line of credit.

  • The credit-building line is Bank of America’s most lenient business loan option. Its requirements include:

    • $50,000 in annual revenue
    • Under 2 years in business
    • $1,000 security deposit

Kiva is an ideal lender for borrowers with subprime credit because of its nontraditional blend of crowdfunding and peer-to-peer lending. Small business owners start by reaching out to their network of family and friends to fund their projects for a timeline of 15 days or less. This can take some time, but Kiva is one of the few ways a small business owner can get a business loan with no revenue requirement.

Once the private funding is over, business owners can publicize their financing needs to Kiva’s network of over 1 million investors. Unlike traditional loans, Kiva business loans don’t charge any interest or loan fees. Kiva works best for microloans of $15,000 or under.

  • Kiva is light on the traditional eligibility requirements, relying instead on social credit — or character — of the business owner to repay the loan. Its main requirements to apply:

    • Must be 18 years old or older
    • Must use funds for business purposes
    • Must not be in foreclosure or bankruptcy or have current liens

PayPal presents an exclusive business loan offer to small businesses that already use its payment processing platform. PayPal merchants can either choose its working capital loan or short-term loan, both relaxed enough to accept poor credit.

Its working capital loan specifically is a no-credit-check business loan, available to businesses that bring in PayPal sales. This loan works like a merchant cash advance, taking a percentage of your business sales until the loan is repaid. Loan terms are flexible, allowing you to estimate a repayment of under or over 12 months.

  • While you can easily apply online and get funded in minutes, you need to meet some minimums to get approved.

    • Working capital loan: No credit score requirement
    • Business loan: 580 personal credit score
    • Must have a PayPal Business or Premier account for 90 days
    • $15,000 in PayPal sales for Business account
    • $20,000 in PayPal sales for Premier account

Uncapped offers revenue-based funding through online lending. Upon applying, you’ll connect your business bank account to the fintech lender to assess your current and future revenue. It can then fund business loans anywhere from $50,000 to $10 million.

You can either repay as a percentage of your sales or a fixed payment. These revenue-based loans assess a one-time fee called a base fee, charged as a percentage of the entire loan. Uncapped also offers a runway loan for SaaS startups with six months in business looking to extend their runway for business growth.

  • Uncapped requires a high level of revenue to be eligible for its loans. Its requirements include:

    • $50,000 in monthly sales, or $600,000 annually
    • At least 6 months in business
    • Must be in an approved industry: SaaS, e-commerce, direct-to-customer or subscription-based businesses

A small business owner with a 500 credit score will need to find the right lender and do the extra groundwork when applying for credit. Taking these steps may boost the odds of approval:

Know your credit score

If you know you have bad credit, it’s best to check your exact credit score to know your benchmark when applying for business loans. Most lenders set minimum credit requirements to get approved for a bad credit business loan.

For a business loan credit score, the lender may look at your personal or business credit history. You can establish business credit by working with vendors that offer trade credit or by paying for expenses with a business credit card.

Find the right type of business loan for bad credit

Getting approved for a business loan may come down to picking the right type of business loan for bad credit. Any assets or collateral you have could help your case — lenders will see your business as less of a risk since you’re putting more on the line. Types of business loans to consider:

  • Short-term loan: A loan with short repayment terms, often for two years or less with limited loan amounts
  • Business line of credit: Reusable credit that, once approved, you can draw from at any time
  • Microloan: A small loan offered as a conventional, alternative or SBA loan; SBA loans allow borrowing up to $50,000
  • Invoice financing: Financing approved based on a percentage of your outstanding invoices and repaid once the invoices are settled
  • Merchant cash advance: Financing approved based on future debit or credit card sales and either repaid from a percentage of sales or less commonly as a fixed payment

Shop around: Compare eligibility requirements and costs

Once you know your funding needs and you’ve narrowed down financing options, you can look for the best bad credit business loans available. Your goal is to find the offer with the lowest interest rates and fees and the best features your business is eligible for. Many business lenders will define their lending requirements directly on their website, or representatives will give those to you over the phone.

Lenders usually state requirements for time in business, monthly or annual revenue and credit score. They may also require a personal guarantee or collateral. As you’re comparing lenders, you may want to prequalify with multiple lenders. That way you can see the exact loan offers complete with the rates for bad credit business loans that you’ll be charged.

Find a co-signer

While not required, finding a co-signer to guarantee payment could help you secure financing, especially if your credit is too low to qualify for funding on your own. But you want to make sure you make all payments, or the co-signer will have to make payments for you or face negative consequences including negative marks on their credit report.

If a co-signer doesn’t fully understand the responsibility, you could ruin a relationship if they’re not prepared to back you if your business can’t make the payments.

Bottom line

Getting a business loan with a 500 personal credit score may take finding the right loan and putting your best application forward. While options are limited, you can find lenders specializing either in alternative loans or business loans for bad credit. Once you know your options, you can compare loans with the most affordable rates and features that best match your financing purposes.

  • Yes, startup loans tend to stay lenient in terms of credit requirements. For example, a lender may offer business loans with a minimum 600 personal credit score while accepting businesses with six months’ experience. Some lenders do offer startup business loans for a 500 credit score.
  • Getting a no-credit-check business loan is possible, though difficult since most lenders set a minimum credit score required to be eligible. You may be limited to startup funding options like business grants, crowdfunding or financing through a pool of investors.
  • If you don’t have the credit history to show you’re a good fit for traditional business loans, you might opt for a certain type of small business loan for bad credit. This may include invoice financing or factoring or merchant cash advances. These types of business loans either bypass credit checks entirely or lower credit requirements to accept most loan applications. Invoice financing uses outstanding invoices and your clients’ credit to determine loan approval, while merchant cash advances base approvals on your future credit and debit card sales.